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Where To Go When The Banks Say No

It’s becoming much harder to get loans from the bank. Their approach has become increasingly conservative and this is unlikely to change as they try to rewrite their pre-recession reputation.

The good news is, the alternative finance market is predicted to grow tenfold in the next five years. However the options can be overwhelming. Here are a few to consider when the bank just won’t help.

When the banks say no…

Peer to peer lending

The great thing about peer to peer is speed. You can get quick decisions and access to funds within days rather than weeks. What’s more, it’s much more receptive to quirky and tech-led companies because the investors have the insight to recognise the opportunity banks are often blind to. However to make peer to peer an option you really need to establish a network of mentors. Not necessarily people who have the money to invest themselves, but people who are well connected and can recommend you to associates looking for low-risk, high-return investment opportunities.

Crowd funding

The huge pro to crowd funding is that investors usually just require monetary return. They don’t want to be involved in making the day-to-day business decisions. Which means you can continue to run the business to your rules. What’s more, the people interested in crowd funding tend to appreciate the zeitgeist: those ideas that seem too much of a gamble for the bank to finance but see risk takers more than happy to pay £1,000 to see if it will come off.

Venture capital

Venture capitals are currently rich with investors hungry for a slice of the next best thing but who don’t have the time, energy or idea to get something off the ground. Plus, if your plan is strong enough, this route can help you raise up to £1m.

Attracting investment of this kind though comes around to who you know. Venture capitalists hate unsolicited bids. My friend who works in the industry says he’ll look for flaws in every pitch submitted by email. Whereas, if a contact recommends a new start-up, he’ll do all in his power to make it work. So it’s really important that you actively seek well-connected mentors who can open doors.

The one exception to this rule is speed-funding events such as Angels’ Den. This is where you have three minutes to pitch an idea. Very Dragons’ Den, but worth a punt.

Bridging loans

This obviously comes at a premium. But if successful, they can be lucrative for you as well as the funder. Usually the bridging loan company wants their money back within a year. However this gives you time to use the investment and make a difference. Which, in turn, gives you something with a proven track record to instil confidence in the bank next time you approach them for a loan.

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